Tax Quarry

On April 5, 2006 the Federal Court of Appeal (“FCA”) rendered its decision in A.Y.S.A. Amateur Youth Soccer Association v CRA[1]. The decision was an appeal from a CRA assessment denying the appellant's application to be registered as a charity under the Income Tax Act (“ITA”). According to the CRA, A.Y.S.A. was not entitled to registration as a charitable organization because its main objective was to promote as sport in Ontario, specifically amateur youth soccer. The FCA agreed with the CRA’s assessment and dismissed A.Y.S.A’s appeal.

A.Y.S.A. appealed the FCA decision to the Supreme Court of Canada (“S.C.C.”). Judgment reserved. On May 15, 2007, McLachlin and Bastarache, Binnie, LeBel, Deschamps, Fish, Abella, Charron and Rothstein JJ., finished hearing the appeal, however, the Court reserved judgement.[2] 

Many are awaiting the SCC decision with much anticipation because of its potential to change the status quo for charitable registration standards. As was argued by the CRA at the FCA, and likely at the SCC, the policy not to extend charitable registration to provincial organizations whose main objective is to promote sport is consistent with the original intentions of the legislature that introduced the legislation that permits charitable registration. The CRA argued that registration was specifically provided for Canadian Amateur Athletic Associations to permit them to raise funds and issue tax receipts. However, the language in the ITA did not extend to provincial organizations that promote sport locally. In the CRA’s opinion, this was not an over site but intentional drafting. 

Nevertheless, with increased sensitivity and awareness around the need to reduce obesity among Canadian youth and children, if the SCC decision reflects current realities then the court is likely to rule in favour of A.Y.S.A. and other similar organizations, which will permit them to access charitable status or amateur athletic status. This would change the longstanding policy of the CRA and the common –law and, therefore, may force the CRA to respond by amending the legislation to, specifically, exclude these entities. Alternatively, the CRA may adjust its policy to also reflect the current realities of life in Canada. 

Unfortunately, we will have to wait for the SCC decision to see how the next chain of events will unfold.

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